Is Belocal or its affiliates permitted to profit from a franchisee's purchases from approved suppliers?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
You must comply with all of our standards and specifications relating to the purchase of all supplies, materials, equipment (including computer hardware and software), and other products and services used in the Franchised Business. We formulate our standards and specifications based on a variety of factors and can issue such standards and specifications to you from time to time, including in writing in the Franchise Brand Standards Manual. If we have approved suppliers for any supplies, products, and/or services used or offered by your Franchised Business, you must use those suppliers. We may change the number of approved suppliers at any time and may designate ourselves, an affiliate, or a third party as the exclusive source for any particular item or service. We may profit from your purchases and leases from approved suppliers, and we and/or our affiliates may receive payments, fees, commissions, or reimbursements from such suppliers in respect of your purchases and leases.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 33–35)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Belocal or its affiliates may profit from franchisee purchases and leases from approved suppliers. The FDD states that Belocal may receive payments, fees, commissions, or reimbursements from such suppliers. This is a fairly common practice in franchising, where franchisors negotiate deals with suppliers and receive compensation for directing franchisee business to them.
For a prospective Belocal franchisee, this means that the cost of goods and services from approved suppliers might be higher than what could be obtained independently. While Belocal may benefit financially from these arrangements, franchisees are obligated to use approved suppliers for certain items. This requirement ensures brand consistency and quality control, but it also limits the franchisee's ability to seek out potentially lower-cost alternatives.
Belocal does allow franchisees to request approval of new suppliers, but Belocal is not required to approve any particular supplier. Belocal may also inspect the supplier's facilities, software, security systems, or procedures. The franchisee may have to pay or reimburse Belocal for reasonable expenses incurred during the supplier/item approval process, regardless of whether approval is granted.
It is important for a prospective Belocal franchisee to understand that Belocal's affiliate, The N2 Company, is an approved supplier for optional services. Belocal's directors, Duane Hixon and Earl Seals, have ownership interests in The N2 Company. During the fiscal year from July 1, 2024, through June 30, 2025, The N2 Company received no revenue from Belocal franchisees' required purchases or leases.